Compare China and New Zealands Corruption Percentage Index and Political Risk

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nQuestion 1

nTransparency International ranked China in 80th position out of 177 nations in its Corruption Percentage Index in 2013. The levels of corruption in the country seem to be increasing gradually from 40th position in 1995 to the current level (Transparency International, 2014). Contrary, the Corruption Percentage Index in 2013 showed New Zealand as the least corrupt country in the world with a score of 96 out of 100. The country has appeared consistently as a nation with strong reputation for good governance since 2003 (Transparency International, 2014). Various forms of corruption include bribery, favoritism, statistical falsification, misappropriation and patronage. Corruption increases economic inequalities, enhances social conflicts and damages the environment (Caragliano, 2012). In addition, it increases poverty levels because the amount of taxes reduces that necessary to create employment. In addition, widespread corruption in a country would create a huge threat to future political stability and economic prosperity.

nThe differences between the two nations level of corruption occurs due to various factors. First, policies put in place in the respective nations determine the levels of corruption. In New Zealand, the government has instituted policies that enhance ethical practices and good governance in public and private institutions (Reuters, 2010). For instance, institutions such as Serious Fraud Office monitor fraud and corruption allegations in the country. The agency has successfully investigated scandals involving $2.2 billion. They managed to accomplish a 100 percent recovery rate. Secondly, New Zealand is a capitalist economy with high GDP growth rate of 7 percent (Bryce, 2013). The country has competitive political party system that promotes democratic and transparent policies.

nHowever, in China, the government has failed to establish policies, norms and agencies that deal with fraud. Moreover, the socialist policies promote cases of nepotism and embezzlement of funds. Therefore, China has faced exceptional corruption in both private and public institutions (Lo, 2009). In this respect, levels of corruption in China continue to grow. The majority of business deals often involve corruption (Publishing, & Centre, 2013). China Communist Peoples Party promotes corruption and inefficiencies in government.

nQuestion 2

nLack of transparency in China increases the political risks in the country relative to New Zealand. The nation is vulnerable to instability because of single-party rule since there are minimum transparent legal systems. Lack of transparent political policies in China increases the risk of doing business especially for foreign investor (Caragliano, 2012). Most foreign corporates faces conflicts of interest with the policy makers in terms of firms accounts and filings. Transparency regulations change suddenly in favor of political sectors.

nChina is prone to business interruptions especially during strikes and riots. For instance, the recent Hong Kong riots have paralyzed businesses in the city. The rioters demand democratic reforms in the nation (Stuart, 2014). As the nation experiences effects of global economic crisis and income disparities among its citizens, there is rise in political violence. Additionally, due to high levels of corruption in the Chinese Communist Party, there is widespread civil unrest. The regime also fails to deal with counterfeiting and piracy that risks production of foreign firms in China (Lo, 2009). Furthermore, there are contract frustrations among companies in the country particular when dealing with state-owned parties (Stuart, 2014). Firms are cautious to buy insurance against risky political expropriation and violence.

nNew Zealand has low political risk relative to China due to openness, economic stability and fair dealing. The nation has a good reputation of protecting foreign investors. In addition, the nation has a minimum risk environment for investment in business ahead of China (Bryce, 2013). The nations stability in democracy is credited as one of the best in the world hence has low political risks. This contributes to a good business environment and increases confidence to carry out businesses at the present and in the future (Reuters, 2010). Systems are put in place to protect private property rights and intellectual properties. However, huge public debt, global crisis and policy constraints remain as a huge drawback to economic prosperity. Therefore, the political regime especially in the National Party should initiate economic policies that mitigate the effect of economic crisis in New Zealand (Ministry of Business, Innovation & Employment, 2014).

nReferences

nBryce, E. (2013). Political corruption in New Zealand – 2013 (liberation). Liberation.typepad.com. Retrieved 22 October 2014, from http://liberation.typepad.com/liberation/2013/12/political-corruption-in-new-zealand-2013.html

nCaragliano, D. (2012). Is China Really the 80th-Most-Corrupt Country on Earth?. The Atlantic. Retrieved 22 October 2014, from http://www.theatlantic.com/international/archive/2012/12/is-china-really-the-80th-most-corrupt-country-on-earth/266172/

nLo, S. (2009). The politics of cross-border crime in greater China. Armonk, N.Y.: M.E. Sharpe.

nMinistry of Business, Innovation & Employment,. (2014). Stability & security | New Zealand Now. Newzealandnow.govt.nz. Retrieved 22 October 2014, from http://www.newzealandnow.govt.nz/investing-in-nz/stability-security

nPublishing, O., & Centre, O. (2013). OECD Development Pathways. Paris: OECD Publishing.

nReuters,. (2010). New Zealand’s key political risks. TVNZ. Retrieved 22 October 2014, from http://tvnz.co.nz/politics-news/new-zealand-s-key-political-risks-3875162

nStuart, C. (2014). Political stability in China comes with little transparency. Businessinsurance.com. Retrieved 22 October 2014, from http://www.businessinsurance.com/article/99999999/NEWS040103/120309887?tags=|59|332|338|76|73|313|80|342

nTransparency International,. (2014). How corrupt is your country?. Transparency.org. Retrieved 22 October 2014, from http://www.transparency.org/cpi2013

nTransparency International,. (2014). Corruption Perceptions Index. Transparency.org.nz. Retrieved 22 October 2014, from http://www.transparency.org.nz/Corruption-Perceptions-Index

nVreeland, J., & Dreher, A. (2014). The Political Economy of the New Zealand. New York: Cambridge University Press.